Tom is program manager for his organization. His program is scheduled to last ten months and has a cost estimate for the program of $550,000. It is now month nine and Tom reports that he actually has

Question

Options

• AA poor cost estimate prevented the organization from adding things to the program scope.
• BTom has overestimated the cost of the program.
• CA poor cost estimate could affect the organization's decisions to invest the funds elsewhere .
• DTom has forgot to include deliverables in the program.

• A
  6% (2)
• B
  23% (7)
• C
  58% (18)
• D
  13% (4)

Explanation

A positive cost variance means the program spent less than budgeted, which seems favorable. However, it can signal that the original cost estimate was inaccurate and inflated. If management was told $550,000 was needed, they committed those funds to this program and did not invest them elsewhere. A significantly inflated estimate means the organization may have foregone other profitable investments or opportunities based on flawed financial planning. This is why accurate estimating matters - overestimating locks up capital unnecessarily and undermines organizational decision-making about resource allocation.

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